The LLC was introduced by the Limited Liability Company Act 2016 (LLC Act), which was passed in the Senate in July 2016 and became operative on 1 October 2016.
The new legislation provides an additional option for those structuring investment funds, private equity vehicles and investment holding vehicles. As it is modelled on the Delaware LLC, it will be familiar to those that do business with the United States.
This commonality with the Delaware LLC is one of the many benefits of using an LLC to structure investment vehicles. The LLC allows greater consistency between onshore/offshore structures and will potentially reduce implementation costs when using documentation employed by onshore vehicles. American managers using a Delaware LLC onshore now have the option of forming a Bermuda LLC offshore.
The LLC is a hybrid legal vehicle that has many of the features of a partnership with separate legal personality – but within a corporate entity. The LLC also has much of the flexibility of a partnership and the terms of the LLC agreement – including operations, management and allocations of profits – can be made bespoke.
Like a company limited by shares and a limited partnership, the liability of an LLC’s member is limited.
Bermuda exempted companies have separate legal personality but must maintain a share capital while an exempted limited partnership has greater contractual flexibility in relation to capital accounting provisions. The members of an LLC have an interest in a capital account like a partnership.